This Disney CEO announcement is bad news for AMC
The Walt Disney Company (NYSE: DIS) CEO Bob Chapek presented at a virtual conference hosted by Goldman Sachs. As part of this discussion, Chapek spoke about various Disney business segments and strategies.
Unsurprisingly, the subject of exclusive theatrical movie releases was brought up, to which the CEO gave insight into the thinking of the company. The House of the Mouse does not commit to any exclusive theatrical releases in the future. The announcement follows a previous one where Disney said it will exclusively release the rest of its 2021 movie slate in theaters. Let’s dig deeper and see why this could be bad news for the movie channel. AMC Entertainment Group (NYSE: AMC).
Disney keeps its options open
Since the start of the pandemic, Disney has implemented three methods to release new films: Directly to its free streaming service for subscribers, simultaneous theatrical release with the option to purchase the film on the streaming service for $ 29. , $ 99, and finally, the traditional exclusive theatrical release. Note that studios typically share box office revenue 50/50 with movie chains.
Of the three, there is no doubt that AMC would prefer exclusive theatrical releases. This way, if consumers want to see the movie, they have no choice but to go to the movies to watch it. That’s, of course, for the first 30 or 45 days or as long as the exclusivity deal is in place before moving on to streaming services. With no choice but to wait, consumers may be enticed to look in theaters.
At the opposite end of the spectrum are the free versions for existing subscribers straight to streaming. These are the worst for AMC because the movies never hit theaters and don’t generate any revenue.
While not the best, the simultaneous release format gives AMC a chance to get people to theaters and earn revenue from ticket sales and concessions. by marvel Black Widow was released in theaters and on Disney + for purchase at $ 29.99 the same day. As of this writing, the film has grossed $ 378 million in box office sales, not to mention the revenue generated from selling $ 9 popcorn and $ 6 soda.
The film also generated $ 125 million in sales on Disney +. At $ 29.99 per purchase, that’s at least four million homes. You can begin to see how a simultaneous release could cannibalize box office sales.
Therefore, AMC must not have been satisfied with the Disney CEO’s failure to commit to exclusive theatrical releases in the future. Disney had already committed to exclusive releases for the remainder of 2021, so there was hope that it would extend the decision long-term, which was not the case.
Home theaters are getting better
Box office ticket sales have been steadily declining for two decades. The home viewing experience has improved over the years, while the cinema experience has remained about the same, albeit more expensive.
The coronavirus pandemic has allowed studios like Disney to experiment and learn from several movie release options. Before the outbreak, the only option was exclusive theater. Studios wouldn’t be careful if they didn’t keep this option, even if they didn’t end up exercising it. At the very least, it could improve the studios’ bargaining power over revenue distribution and other terms against AMC.
As AMC struggles to bounce back from lost revenue during the pandemic, news like this from Disney won’t help.
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